Clajon Gas Co., L.P., Aquila Gas Pipeline Corp., Tax Matters Partner - Page 7

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          the Court of Appeals for the Tenth Circuit in that case.  Duke              
          Energy Natural Gas Corp. v. Commissioner, 172 F.3d 1255 (10th               
          Cir. 1999), revg. 109 T.C. 416 (1997).  As explained below, we              
          follow our decision in Duke Energy, and we hold that the proper             
          recovery period for the gathering pipelines is 15 years.                    
          II.  Applicable Statutory and Administrative Provisions                     
               Section 167(a) allows “as a depreciation deduction a                   
          reasonable allowance for the exhaustion, wear and tear * * * of             
          property used in * * * [a] trade or business”.  Section 167(b)              
          references section 168 for determination of the depreciation                
          deduction in the case of property to which section 168 applies.             
          Section 168 is entitled “Accelerated Cost Recovery System”, and             
          it sets forth a cost recovery system based not on the useful life           
          of an item of property but, instead, on certain congressionally             
          determined (accelerated) recovery periods.  In pertinent part,              
          section 168(a) provides:  “the depreciation deduction provided by           
          section 167(a) for any tangible property shall be determined by             
          using * * * the applicable recovery period”.  Pursuant to section           
          168(c) and (e), the recovery period for property is based upon              
          (but, generally, is shorter than) its “class life”.  Section                
          168(i)(1) defines “class life” as “the class life  * * * which              
          would be applicable with respect to any property as of January 1,           

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